Wells Fargo has consented to pay federal regulators $1 billion to settle charges pertaining to sales of automotive collateral protection insurance and mortgage interest rate-lock extensions.
Wells Fargo will pay $1 billion to settle charges pertaining to the sale of two products to auto- and home-loan customers. Photo by Laimerpramer via Wikimedia Commons
SAN FRANCISCO — Wells Fargo has officially entered into $1 billion worth of consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC). At issue are collateral protection insurance (CPI) for auto loans and interest rate-lock extensions for home buyers.
As many as 570,000 car buyers who financed their purchases through Wells Fargo from 2012 to 2017 were erroneously charged for CPI under a policy that called for the bank to purchase comprehensive and collision insurance if a customer failed to do so. For as many as 20,000 such customers, failure to pay the charge may have triggered a repossession.
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As many as 110,000 Wells Fargo mortgage customers were charged a late fee for purchasing interest rate-lock extensions after their initial interest rate expired. In 2016, four former employees blew the whistle, alleging the bank caused the delays. Their claims were backed by findings from an internal review.
The fine does not address the ongoing investigation into Wells Fargo’s sale of guaranteed asset protection (GAP).
News of the $1 billion figure overshadowed the bank’s first-quarter earnings call earlier this month. President and CEO Tim Sloan struck an upbeat tone throughout the April 13 meeting with investors, even as the bank reported diminished originations and performance on its auto lending business, including the sale of its Puerto Rican Subsidiary, Reliable Financial Services, to San Juan-based Banco Popular.
In a press release announcing the $1 billion fine, Sloan said he and his team of executives and managers are “committed” to putting past and present scandals behind them and ushering Wells Fargo into a new era of transparency and good corporate citizenry.
“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers,” he said. “While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”
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